What is in a FICO Score?

A FICO Score is a three-digit number calculated from the credit information on your credit report at a consumer reporting agency (CRA) at a particular point in time — a snapshot. It summarizes information in your credit report into a single number that lenders can use to assess your credit risk quickly, consistently, objectively and fairly. It helps you obtain credit based on your actual borrowing and repayment history.

FICO Scores take into consideration five main categories of information in a credit report.

Payment history — approximately 35% of a FICO Score

This will show if you have paid your bills on time. How important are on time payment – If you have a credit score of 680 or higher, one 30-day late payment reported will decrease your credit score by 60 to 80 points

How much you owe — approximately 30% of a FICO Score

This will calculate the amounts you owe on all your accounts, the number of accounts with balances and how much of your available credit you are using. It is important to keep amounts owed less than 30% of your limit.

Length of credit history — approximately 15% of a FICO® Score

Longer credit will help your score, if you are no longer using a credit card that has been open for 10 years, do not close that card. It is not hurting your score keeping it open with a $0 balance. It is still possible for people with a shorter credit file to have a good score, these people will want to make sure payments are made on-time and balance are kept at 30% or less owed.

New credit — approximately 10% of a FICO® Score

Credit research shows that opening several credit accounts in a short period of time represents greater risk – especially for people who do not have a long credit history. Hard inquires can affect the credit score for 2 years.

Types of Credit — approximately 10% of a FICO® Score

When your score is calculated your mix of credit cards is taken into consideration. They will look at your mix of credit, such as: credit card, store accounts, installment loans, finance companies and mortgage loans. However, it is not necessary to have one of each, and it is not a good idea to open a credit account you don’t intend to use.